EconPapers    
Economics at your fingertips  
 

Market Size and Pharmaceutical Innovation

Olivier de Mouzon, Pierre Dubois (), Fiona Scott Morton and Paul Seabright

No 8367, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper quantifies the relationship between market size and innovation in the pharmaceutical industry. We estimate the elasticity of innovation, as measured by the number of new chemical entities appearing on the market for a given disease class, to the potential market size represented by the willingness of sufferers of diseases in that class (and others acting on their behalf such as insurers and governments) to spend on their treatment during the patent lifetime. We find positive significant elasticities with a point estimate under our preferred specification of 25.2%. This suggests that at the mean market size an additional $1.8 billion is required in additional patent life revenue to induce the invention of one additional new chemical entity. An elasticity substantially and significantly below one-half is also a plausible implication of the hypothesis that innovation in pharmaceuticals is becoming more difficult and expensive over time, as costs of regulatory approval rise and as the industry runs out of "low hanging fruit."

Keywords: elasticity; innovation; market size; pharmaceuticals (search for similar items in EconPapers)
JEL-codes: L65 O31 O34 (search for similar items in EconPapers)
Date: 2011-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=8367 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Market size and pharmaceutical innovation (2015) Downloads
Working Paper: Market Size and Pharmaceutical Innovation (2014) Downloads
Working Paper: Market Size and Pharmaceutical Innovation (2014) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:8367

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=8367

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2021-04-12
Handle: RePEc:cpr:ceprdp:8367